To meet ever-growing demand for new revenue streams, large tech companies are increasingly drawn to opportunities in the highly competitive financial services market. The recent announcement of the new Apple Card is just one example of Big Tech entering financial services with a primarily mobile and digital offering to its 1 billion or so iPhone customers.
In addition to the competitive challenges however, there are significant legal and regulatory hurdles to be overcome before new entrants can deliver financial services directly to customers. We are considering those barriers to entry, the impact of competition law in defending or opening up the market, and the operational and compliance risks for both the finance and tech sectors as they become increasingly reliant on one another.
The legal reality is that getting into financial services isn’t easy and requires careful navigation - even for Big Tech. The extent of the regulatory burden depends on what providers are actually doing in the sector. Incumbent banks are working together on technology to open up markets (e.g. open banking) but in other contexts they also need to be careful about teaming up in a way that might be anticompetitive. Established firms also need to be careful about how much they can rely on tech companies as and all financial services providers need to be prepared for technological failures and operational crises.